Is Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) a buy, sell, or hold? The smart money is getting less optimistic. The number of long hedge fund positions dropped by 1 lately. It might be of interest to know that the shares of Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) faced a similar market reaction. For an in-depth understanding of the hedge fund reaction, we will discuss hedge funds that held positions in the company, at the end of September.
The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Diana Containerships Inc (NASDAQ:DCIX), Comstock Resources Inc (NYSE:CRK), and PRGX Global Inc (NASDAQ:PRGX) to gather more data points.
To most shareholders, hedge funds are seen as slow, old investment tools of yesteryear. While there are more than 8000 funds trading at present, our experts choose to focus on the crème de la crème of this club, approximately 700 funds. These investment experts watch over bulk of the hedge fund industry’s total capital, and by tailing their unrivaled stock picks, Insider Monkey has deciphered a few investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Keeping this in mind, we’re going to take a gander at the key action regarding Aurinia Pharmaceuticals Inc (NASDAQ:AUPH).
What does the smart money think about Aurinia Pharmaceuticals Inc (NASDAQ:AUPH)?
At the end of Q3, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 20% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Great Point Partners, managed by Jeffrey Jay and David Kroin, holds the largest position in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). Great Point Partners has a $6.9 million position in the stock, comprising 2.7% of its 13F portfolio. Sitting at the No. 2 spot is Julian Baker and Felix Baker of Baker Bros. Advisors, with a $2 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Israel Englander’s Millennium Management, and Jonathan Lourie and Stuart Fiertz’s Cheyne Capital.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: RA Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically, a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case here because none of the 700+ hedge funds tracked by Insider Monkey identified Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) but similarly valued. These stocks are Diana Containerships Inc (NASDAQ:DCIX), Comstock Resources Inc (NYSE:CRK), PRGX Global Inc (NASDAQ:PRGX), and Camtek LTD. (NASDAQ:CAMT). All of these stocks’ market caps are similar to Aurinia Pharmaceuticals Inc (NASDAQ:AUPH)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DCIX | 4 | 25695 | -3 |
| CRK | 7 | 3793 | -2 |
| PRGX | 13 | 22555 | -1 |
| CAMT | 4 | 4522 | 1 |
As you can see, these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $10 million in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH)’s case. PRGX Global Inc (NASDAQ:PRGX) is the most popular stock in this table. On the other hand, Diana Containerships Inc (NASDAQ:DCIX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is even less popular than Diana Containerships Inc (NASDAQ:DCIX). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.
